Income Tax Appellate Tribunal - Kolkata
Smt. Chanda Devi Saraf vs Income-Tax Officer on 26 December, 1988
Equivalent citations: [1990]32ITD518(KOL)
ORDER
A. Satyanarayana, Accountant Member
1. This appeal filed by the assessee is against the order of the AAC dated 29-10-86 for the assessment year 1962-63 for which the previous year ended on 31-3-62.
2. In the assessment made under Sections 143(3)/147 on 7-3-83 the ITO stated as under:-
In response to the notice Under Section 148, Sri Kanhaiyalal Saraf, the legal representative of the deceased assessee filed a return showing a total income of Rs. 1,206 as was shown in the original return filed in 1965. This amount represented interest income from Carry Co. The legal representative of the assessee filed a letter dt 18-4-79 along with the present return inter alia stating that the notice Under Section 148 was not valid and that the return was filed under protest. It was also stated that in the return there was only interest and there was no other income during the year. Sri K.C. Agarwal A/R appeared from time to time in response to the notice Under Section 143(2) when Sri R.L. Saraf, Accountant was also present. During the course of discussion, the A/R was requested to state the facts regarding the transfer of jewellery and ornaments worth Rs. 98,535 (as per assessee's valuer) by the assessee to Smt. Draupadi Devi Kedia by means of a settlement of trust on 10-3-62. The facts of the case are that the assessee migrated from the then East Pakistan to India after partition and brought Rs. 20,000 as per affidavit dt. 17-5-64 and the said sum was invested by her in M/s. Carry Company of which she became a partner in about 1964. As the fact is, the assessee does not appear to have disclosed any other sum of assets brought over from the then East Pakistan nor has any declaration been given by her subsequently in regard to the acquisition of jewellery and gold ornaments worth Rs. 98,535 which she transferred to Smt Draupadi Devi Kedia. Had it been the fact that the said jewellery and ornaments were acquired by her husband who died in 1957, the assessee or her husband would have declared the possession of the same at some point of time before the transfer was made. In the absence of such declaration, the question arises as to the capability of the assessee to transfer the jewellery and ornaments, not to speak of the source of acquisition thereof. The A/R failed to produce books of account if any maintained by the assessee and failed to offer any explanation about the nature and source of the investment or income from which the said jewellery and ornaments were acquired. In the circumstances, it cannot but be concluded that the assessee acquired the said jewellery and ornaments out of her income from some source which remains unexplained by her. Accordingly, the sum of Rs. 98,535 being the value of the jewellery and gold ornaments is treated as income of the assessee of the financial year ending 31-3-62 Under Section 69 of the I.T. Act,1961.
Subject of the above, total income is computed as under:-
Interest as per return ... Rs. 1,206
Income from undisclosed
sources ... Rs. 98,535
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Total income Rs. 99,741
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Accordingly, he completed the assessment on a total income of Rs. 99,741. Aggrieved by the order of the ITO the assessee preferred an appeal to the AAC.
3. In the appeal before the AAC the assessee has taken the following grounds challenging the validity of the reopening of the assessment:-
1. FOR THAT on the facts and in the circumstances of the case, the learned officer erred in assuming jurisdiction Under Section 147 and initiating proceedings thereunder. There was no information or material before the Income-tax Officer within the meaning of Section 147 for forming the requisite belief that the income of the appellant assessable to tax for the assessment year 1962-63 had escaped assessment. The requisite conditions having not been satisfied in this case, the initiation of the proceedings, the issuance of notice Under Section 148 and the assessment made in pursuance thereof is wrong, illegal, without jurisdiction and in otherwise bad in law.
2. FOR THAT the statutory notice Under Section 148 having not been issued and served before the 31st March, 1979, the entire proceedings and the assessment made in pursuance thereof is without jurisdiction and barred by limitation.
The assessee also disputed the addition of Rs. 98,535 on merits. The AAC dismissed the contentions of the assessee on the point of validity of reopening of the assessment by observing as under:
The notice Under Section 148 was duly issued and received by the appellant within statutory time limit. Hence the contentions of the appellant that the notice was illegal and barred by limitation does not stand.
However, he reduced the addition to Rs. 45,000 observing as under:-
However, in regard to valuation of jewelleries and ornaments it is seen that the valuation shown by the appellant as on 31-3-76 worth Rs. 98,535 has been taken into consideration for the assessment year under consideration i.e. 1962-63. This amount has been taken on the basis of a letter issued by the ITO, E-Ward/SSC-VII/Cal., dated 9-5-77. In his letter it is stated that the valuation of jewelleries as per appellant's valuer stands at Rs. 98,535 and this valuation by appellant valuer is the valuation report with reference to valuation date on 31-3-76. Therefore, the valuation of jewelleries as on 31-3-76 should be much less in the year 1962-63. The A/R has referred to gift-tax assessment of the appellant with reference to jewelleries and ornaments. It is seen from the order that the GTO has estimated the valuation of such jewelleries for the assessment year 1963-64 at Rs. 49,000. Since the assessment order under consideration is 1962-631 think it would be proper to estimate the value of jewelleries etc. at Rs. 45,000 only and the same should be considered as appellant's income from undisclosed source.
Dissatisfied with the order of the AAC the assessee perferred the present appeal before the Tribunal.
4. The assessee's counsel filed a paper book of 16 pages. His arguments were to the following effect:
The assessee made two gifts on 10-10-61 and 5-4-62. These are evidenced by Declarations of Trust dated 10-3-62 and 16-4-62. The return of gift for the assessment year 1963-64 was filed on 5-10-64. The original income-tax assessment for the assessment year 1962-63 of the assessee was completed by the I.T.O., C-Ward, Dist. 1(2), Cal., on 22-12-65. The Gift-tax assessment was originally made on 26-3-80 by the same I.T.O. wherein a reference has been made to the deeds dated 10-3-62 and 16-4-62. The copy of the original income-tax assessment order can be seen at page 1 of the Paper Book. The Gift-tax assessment order dated 26-3-80 can be seen at page 2 of the Paper Book. In that Gift-tax assessment order, the value of the gifts was taken at Rs. 98,535. The said Gift-tax assessment was set aside by the AAC on appeal on 23-4-81. The reassessment was completed on 22-10-83 taking the value of gifts at Rs. 49,000. The reassessment order can be seen at page 4 of the Paper Book. Thus, it would be noted that the bringing of jewellery from Pakistan was mentioned in the Declarations of Trust and that the fact of gifts was known to the ITO when he made the original income-tax assessment for the assessment year 1963-64. From this, it is clear that there was no new information to the ITO for reopening of the assessment. Further, the notice under Section 148 dated 24-3-79 was addressed to Chanda Devi Saraf. The said notice is bad in law as it was given to a dead person because Chanda Devi Saraf died on 11-10-77. Intimation was given to the ITO regarding the death of Chanda Devi Saraf by letter dated 14-11-77. The notice under Section 148 dated- 24-3-79 can be seen at page 14 of the Paper Book. The letter dated 14-11-77 from Kanhaiya Lal Saraf informing the death of Chanda Devi Saraf can be seen at page 16 of the Paper Book. As the Gift-tax assessment was made on 22-10-83 taking the value of gifts at Rs. 49,000, the sanction of the C.B.D.T. for reopening of the assessment is invalid. Further, since the notice under Section 148 was not served before 31-3-79, the reassessment proceedings were without jurisdiction. The C.B.D.T. has no basis or reason to believe to allow proceedings under Section 147 in this case. It appears that the C.B.D.T. or the ITO had not applied their minds to the question. It was done mechanically. In the circumstances, the reassessment made on 7-3-83 should be cancelled.
5. The Departmental Representative filed photostat copies of the order sheet of the income-tax assessment file of the assessee and photostat copy of the Telegram from the C.B.D.T. received on 24-3-79 and photostat copy of affidavit of the assessee Chanda Devi Saraf. His arguments were to the following effect:
The ITO received the approval of the C.B.D.T. for initiating proceedings under Section 147(a) on 24-3-79 as can be seen from the copy of the Telegram filed before the Tribunal. On the same day notice under Section 149 was issued to the assessee. According to the decision of the Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163/33 Taxman 229 if the notice under Section 148 is issued within the period of limitation it is sufficient, the service on the assessee beyond the period will not make it time barred. In this case, since notice under Section 148 has been issued on 24-3-79 before expiry the date of 31 -3-79 it is sufficient. The proceedings are not time barred. According to Section 149(1 )(a)(ii) the notice under Section 148 can be issued if the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50,000 or more for that year. Since the ITO was of the opinion that the income escaped amounted to Rs. 98,535 he obtained sanction of the C.B.D.T. and issued notice under Section 148. In his opinion the income escaped amounted or was likely to amount to Rs. 50,000 or more for that year. So, the initiation of the proceedings under Section 148, cannot be found fault with. The order of the AAC is to be upheld.
6. We have considered the rival submissions, perused the papers filed before us and the case law cited. According to the decision of the Supreme Court in the case of R.K. Upadhyaya (supra) the issue of notice under Section 148 within the period of limitation is sufficient. Its service before the period of limitation is not necessary. Since the present case the notice under Section 148 was issued on 24-3-79 i.e. well before the expiry date of 31-3-79, the proceedings under Section 148 are well-founded. They are not time barred. Further, the assessee argued that since the value of the jewellery which has been taken at Rs. 49,000 in the Gift-tax assessment dated 22-10-83, is below Rs. 50,000, the assessment proceedings under Section 148 were not valid as per Section 149(l)(a)(ii) cannot be accepted. This is because the words in that section are "income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50,000 or more". The final determination of the value/ amount is not relevant
7. But, however, the assessee has to succeed. At our request at the time of hearing, the Departmental Representative showed us the Form for recording the reasons for initiating proceedings under Section 148 and for obtaining the approval of the G.B.D.T. in I.T.N.S. 10 sent by the ITO on 6-3-79. In that Form, the Board has given its approval in the space provided against column No. 12 reading as "whether the Board is satisfied on the reasons recorded by the I.T.O. that it is a fit case for the issue of a notice under Section 148". The 4 proval of the Board was given as under:-
Yes. The Board is satisfied.
Sd/-...
23-3-79.
Under Secretary, Central Board of Direct Taxes.
The Departmental Representative has, at our request, filed photostat copies of the said Form before us. We have verified the original. In the original, a rubber stamp has been affixed containing the following words:-
Yes. The Board is satisfied.
Under Secretary, Central Board of Direct Taxes.
The Under Secretary has signed in the blank space provided in the rubber stamp. In the case of Govinda Choudhury & Sons v. ITO [1977] 109 ITR 370 (Ori.) wherein the proposals sent by the Income-tax Officer for initiating reassessment proceedings the Commissioner did not write in his own hand writing 'yes', but the word was affixed by means of a rubber stamp, it was held that there was no valid sanction as laid down in Section 151(2) and that the consequent initiation of proceedings by the Income-tax Officer would be without jurisdiction. While coming to that conclusion, the Hon'ble Orissa High Court had referred to and followed a decision of the Hon'ble Calcutta High Court in the case of Chanchal Kumar Chatterjee v. ITO [1974] 93 ITR 130wherein reference has been made to the decisions of the Hon'ble Supreme Court in the cases of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 and CIT v. Burlap Dealers Ltd. [1971] 79 ITR 609. In the above cases before the Hon'ble High Courts of Calcutta and Orissa the approval was given by means of a rubber stamp only, above the signatures of the Officers concerned. Following those decisions, we hold that there is no valid sanction of the C.B.D.T. as laid down in Section 151(1) of the Income-tax Act, 1961, and so the consequent initiation of the proceedings by the ITO are without jurisdiction.
8. In the result, the appeal is allowed.